Policy Response to Introduce New Investments in Energy Infrastructures
Date: April 9th 2020
Author: Peter Palčec
“An argument has been floated during the last few weeks that COVID-19 and its impact will slow down the energy transition. This will result in lower fossil fuel prices that will reduce the relative advantage of renewables, whilst the public tolerance for paying for the transition will diminish when faced with tough economic times, and government policy focus will be elsewhere. However, this argument ignores the scale of the forced policy response that is being induced by the current crisis. Policy response may induce a wave of new investment in energy infrastructure, despite a tough economic backdrop,” said the consulting company Timera Energy.
One of the key challenges governments face coming out of the COVID-19 shutdown is rapidly restarting investment activity and creating jobs. Support for ‘shovel-ready’ infrastructure projects is an obvious target and the energy transition presents a rich opportunity, at least in Europe.
“There is broad public and political support for climate change action across Europe’s larger developed economies. There is also a strong development pipeline of energy investment projects, e.g. across renewables, storage, interconnectors and other peaking flex. There is also strong momentum behind investors deploying capital targeting clean energy infrastructure, which may be boosted by the risk of inflation,” states Timera Energy.Christine Lagarde, the new head of the European Central Bank, has openly been discussing the combined roles of monetary and fiscal policy in tackling climate change. Her political capital across Europe’s largest countries means she is likely to be a key player in coordinating a unified European policy response to the current crisis, assessed Timera Energy.
“Rather than hampering investment in European energy infrastructure, the current crisis may actually turn out to be an accelerant. Policy-driven stimulus targeting decarbonisation investment may form an important part of the ‘economic cure’,” added Timera Energy.
This article is available also in Slovene.